How Do Foreign SMEs Mitigate Violent Conflict Risk by Doing Good? An Instrumental Stakeholder Theory Perspective

Yongyi Shou (), Xueshu Shan (), Jinan Shao (), Kee-hung Lai () and Qing Zhou ()
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Yongyi Shou: Zhejiang University
Xueshu Shan: Zhejiang University
Jinan Shao: Nottingham University Business School China, University of Nottingham Ningbo China
Kee-hung Lai: The Hong Kong Polytechnic University
Qing Zhou: Hangzhou Dianzi University

Journal of Business Ethics, 2024, vol. 192, issue 2, No 10, 407-422

Abstract: Abstract Large foreign firms’ interventions in violent conflicts have drawn increasing research attention. Nonetheless, scant research has investigated how foreign small and medium-sized enterprises (SMEs), which have little capacity in peacebuilding, can protect themselves from violent conflict risk. Drawing upon the instrumental stakeholder theory (IST), this study explores two specific local community-oriented corporate social responsibility (CSR) practices (i.e., corporate philanthropy and workforce localization) as violent conflict risk buffering strategies for foreign SMEs. Further, we examine their varying effects in different institutional environments (i.e., host country media freedom and labor rights protection). Using data from a cross-country survey of Chinese foreign SMEs combined with archival data from multiple sources, we empirically confirm the attenuating effects of both corporate philanthropy and workforce localization on foreign SMEs’ violent conflict risk. Besides, we discover that host country labor rights protection strengthens the mitigation impact of workforce localization on violent conflict risk. Our study advances the literature on IST and CSR by revealing the risk mitigation mechanism of CSR activities for foreign SMEs and elucidating its institutional boundary conditions.

Keywords: Corporate social responsibility; Foreign SMEs; Violent conflict risk; Corporate philanthropy; Workforce localization; Instrumental stakeholder theory (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10551-023-05521-x

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